Achieving Economic Prosperity and Climate Protection [ PDF ]

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Green Provisions in the U.S. Stimulus Bill: Reducing Emissions While Saving the Economy?

By Max Jerneck

The $787 billion American Reinvestment and Recovery Act, popularly known as the Stimulus Bill, contains $92 billion that can be regarded as greenhouse gas reducing provisions. These include $32.8 billion in clean energy, $26.86 billion in energy efficiency, and $18.95 billion in green transportation. More than being solely environmental measures, the green provisions are aimed at addressing several important goals at once. By making green investments, the Obama administration is hoping to reduce greenhouse gas emissions, create millions of jobs, save money on energy imports and reduce U.S. dependence on foreign oil. Rebuilding the nation’s deteriorating infrastructure is another important goal. Crumbling roads and bridges - not to mention levees - have frequently made the news in recent years, and freight bottlenecks may cost the economy $200 billion a year - nearly 1.6 percent of GDP, according to the US Department of Transportation.

Opponents of the American Reinvestment and Recovery Act (ARRA) contend that it contains ‘wasteful’ spending that coming generations will have to pay for. Obama has responded by stating that the ARRA not only creates jobs in the short run, but saves billions of dollars in the long run. In fact, some of the green investments in the act are crucial, he says, to guarantee that the U.S. economy will be strong and competitive in the future. In the view of the Obama Administration, the current crisis is an opportunity to provide the country with 21st century green infrastructure. White House chief of staff Rahm Emanuel has publicly stated that “a crisis is a terrible thing to waste.” Proponents of the infrastructure spending argue that upgrading the national electric power grid to a smart grid and switching from fossil fuels to renewables is as significant now as building telegraph lines and railroads was in the 19th century. The infrastructure created by the New Deal, the most recent comparable example, was arguably a key factor in the remarkable economic growth that served the nation into the 1970s and beyond.

What kind of jobs and how many?

The White House estimates that the ARRA will create or save 5 million jobs, including 3.5 million by the end of 2010. Green provisions will account for around 1.7 million of these. In the coming months, nearly 500,000 jobs will be created in the energy transmission system, advanced battery technology and energy efficiency, according to the White House. Around 440,000 jobs will be created in the public transport sector, according to the American Public Transportation Association.

Investing in green jobs appears to be an efficient way of reducing unemployment. The Earth Policy Institute states that every billion dollars invested in wind farms creates some 3,350 jobs, which is nearly four times the 870 jobs created with a similar investment in coal-fired power plants. Investment in retrofitting buildings creates more than seven times as many jobs as a similar investment in coal-fired power plants.

Critics are concerned that spending on renewable energy will create more jobs overseas than at home, since the renewable industries of countries like Germany, Denmark and Spain are more competitive. All the more reason to invest in such industries, say the ARRA proponents. Research shows that importing foreign renewable energy technologies can spur the development of a domestic industry. Expanding the domestic green energy market is also a way of attracting investments from foreign companies seeking to locate their manufacturing plants close to the American consumers. Renewable energy investments could thus create additional jobs through spin-off effects in the future. Once created, green jobs are likely to stay around; the Washington Employment Security Department includes green jobs as among the most recession resistant in 2009. Unlike many forms of manufacturing, constructing solar panels and wind towers is in large measure still done in OECD- countries.

While the renewable energy measures will at least in the short run create more foreign than domestic jobs, other green provision jobs such as weatherizing homes cannot be outsourced. The measures may also lead to job creation in other sectors, by sparking demand for goods such as double sheeted windows. The first step in creating green jobs is to retrain the work force. Green jobs provisions will get $500 million in the ARRA, training 70,000 workers. If the plan succeeds, unemployed auto workers could soon be re-trained to manufacture solar panels and wind turbines. According to a study done by a federal task force, workers can expect higher salaries after training. On average, clean-energy jobs pay 10 to 20 percent more than similar work outside the field, the report showed.

Public transportation

The transportation sector is responsible for around 27 percent of total U.S. greenhouse gas emissions, and there is significant room for improvement. The ARRA contains $8.4 billion for public transit and $8 billion for high-speed rail. Compared to many industrialized countries, the American railroad system is in poor shape. Especially on the densely populated East Coast, high speed rail could become a cheap and low-carbon alternative to air travel. On the fastest railroad line today, the Acela line between Washington, D.C. and Boston, the trains average 86 mph, which is about half the speed of France’s TGV trains and a third as fast as the Shanghai Maglev train, which connects Shanghai’s subway with Pudong International airport and can reach 268 mph. High speed rail specialist Joe Vranich considers an investment in an East Coast high speed rail line to be the most effective way of spending the stimulus money. A well-functioning line would set an example and fuel investment in other parts of the country. Political realities will most likely compel Obama to distribute the money in small amounts among several train corridors, however, weakening the potential for any single high speed line.

A survey done by the American Public Transportation Association found that the ARRA spending could fund 787 projects for 227 public transportation agencies that were ready to start within 90 days that otherwise wouldn't have been able to proceed. It said these projects would "create and sustain more than 440,000 new jobs in the coming months.”
In addition to spending on public transport, the ARRA contains what the White House deems “important policy items” that may have lasting effects beyond the expenditure. One of those is the Energy Efficient Transit Facilities, which “directs the Federal Transit Administration to develop a plan to encourage and assist transit authorities in building energy efficient facilities.” The ARRA contains large sums of money toward public transport spending, but the number is small compared with the $40 billion in spending included on highways. Besides public transportation, the ARRA provides a tax credit of up to $7,500 for plug-in hybrid vehicles and funding for advanced battery technology in an effort to stimulate the automotive industry.

Energy efficiency

Energy efficiency efforts provide a relatively quick and easy way of attaining economic and environmental benefits, while simultaneously creating jobs. Many of the technologies needed to weatherize buildings are fully developed and can be installed by unemployed construction workers. Substantial energy savings can be achieved in this field, as about 40 percent of energy use and carbon emissions in the United States come from constructing, operating and powering buildings. Furthermore, the investment returns of energy efficiency measures are very high both in terms of jobs created and speed of results. According to economist Robert Pollin of the University of Massachusetts Amherst, “there is about $26 billion in retrofitting on public buildings that could be done the day after legislation is signed,” and each $1 million in spending would bring about 18 jobs.

The ARRA contains about $4.5 billion to weatherize federal office buildings and $5 billion for a weatherization assistance program for low-income homes. The White House estimates that the average family involved in this program would save $350 per year on heating and air conditioning through proper weatherization. The rationale behind energy efficiency spending, apart from the environmental gains, is that reducing electrical bills will put more money in the pockets of working and middle class families. This will free up money for them to pay off debts or spend on consumer goods - two crucial factors needed in order for the economy to recover.

Smart Grid

An important energy measure in the ARRA is the $11 billion to be spent on power grid upgrading, making it a “smart grid.” The primary goal of the smart grid is to reduce energy costs, prevent power outages and evenly distribute power from alternative sources like wind and solar. Not only is the smart grid important to increase energy efficiency, it is in many ways a prerequisite for the expansion of renewable energy production. In a February 2009 senate hearing, former Vice President Al Gore emphasized the important role of the smart grid in transporting green electricity from the windy and sunny areas where it will be produced to the customers that need it, often hundreds of miles away. Smart grid spending is the single largest energy provision in the ARRA. Critics argue, however, that the allocated $11 billion is not nearly enough. Ed Legge, an analyst with the Edison Electric Institute, has said that $50 billion is needed for all the investor-owned utilities (which make up 70 percent of the U.S. utilities) to roll out smart grid networks.

Renewable energy

Over the next three years, Obama promises to double the amount of renewable energy produced in the United States. The ARRA is a key component to that plan. It contains a host of economic incentives to promote clean energy. Among them are tax credits, bond and loan programs and direct spending in the form of subsidies to renewable energy projects. Tax credits are provided for renewable energy investment and production. Investors in all forms of renewable energy can receive a 30 percent tax credit, a provision that was previously only available for solar power. By extending the existing tax credits for wind energy production to three years, the ARRA attains stability in the market, sending an important signal to investors that wind energy is a safe bet. Research shows that such stability is crucial to attracting investments and expanding the market in renewable energy. Instead of applying for tax credits, renewable energy producers can apply for cash grants, which is presumably a more attractive option in these economically harsh times. Projects aimed at building or rebuilding existing facilities to produce components for renewable energy generation are also encompassed by the tax credit incentives, and so is the production of hybrid or alternative fuel vehicles and instalments of alternative fuel pumps at gas stations.

The ARRA contains unprecedented amounts of spending on green infrastructure. Compared with traditional investments however, the amount seems fairly moderate. Highways receive more than twice the amount of money that does public transportation. And the $11 billion dollars allocated to the smart grid seem rather modest, considering the importance of the project. The American Recovery and Reinvestment Act might be but the first step in a coming expansion of government greenhouse gas mitigating efforts.

Spring 2009 Climate Alert